The Pros and Cons of Arbitration

Because of the increase in cost of litigation, and the more frequent use of arbitration clauses in all forms of contracts, arbitration is used with increasing frequency.

Although arbitration is an excellent choice in many instances, it may not be right in every case. This article will discuss the pros and cons of arbitration so that you may know whether it is right for you.

What Arbitration Is

Arbitration is the use of a neutral third party to listen to evidence and render a binding award which generally is not reviewable upon appeal. It is generally initiated by one party to an agreement which requires disputes to be resolved by arbitration. Parties can also agree to arbitrate their disputes regardless of any contractual obligation.

Benefits of Arbitration

The benefits of arbitration are many. Some of the more pertinent benefits are described below:

1. The proceedings are private. Generally, cases filed in the court systems are a matter of public record.1 Because arbitrations are conducted pursuant to agreement by the parties, the parties can control the privacy of the proceedings. Thus, disputes that may have a negative impact if disclosed to the public can be more effectively controlled. Moreover, if an adverse award is rendered, such information can also be limited to the public.

2. Speed to final resolution. Depending on the size and complexity of your claim, the time between filing of an arbitration claim and its final resolution can be quicker than proceeding through the court system. In many counties, trials of civil matters can be delayed months, if not years, due to shortages of judges and lack of courtrooms because the courtrooms are needed for other specialty courts, such as criminal courts, family courts, probate courts, drug courts, etc. Even though courts endeavor to have most civil cases resolved within twelve months after their filing, the fact is that it is often difficult to get your case heard due to lack of courtroom availability, even once you are assigned a trial date. The same holds true with federal courts, which often are burdened by a high number of cases and the need for judges to attend to other non-civil matters, such as prisoner claims, criminal matters, naturalization proceedings, immigration matters, etc. In most instances, the parties and the arbitrator agree upon a date early on in the arbitration process (normally in a pre-hearing conference attended by all parties and their counsel). Depending on the complexity of the case, cases can be heard within six to nine months from the date of their filing.

3. Certainty of the award. Under most circumstances, arbitration awards are final and binding on the parties. They can be enforced judicially by the use of a petition to confirm arbitration award. The grounds upon which a court can review a decision by the arbitrator are extremely limited. They include undisclosed bias or conflict of interest on the part of the arbitrator, an error in the calculation of the award which is apparent from the face of the award itself, or a manifest disregard of the law. Although these grounds appear to be broad, they are not, and courts have held that even where an arbitrator incorrectly applies the law, or disregards certain evidence in coming to his conclusion, the court will not disturb the arbitrator's opinion and overturn an award.2 Thus, once the arbitrator issues an award, it is generally binding on the parties.